Farmers Union Calls for Concentration Curbs

July 17, 2002

Farmers Union member Nolan Jungclaus, Lake Lillian, MN, told the Senate Agriculture Committee Tuesday that concentration in the livestock industry, especially meatpackers who own and feed their own livestock, is "sucking the lifeblood out of rural communities."

However, American Meat Institute President J. Patrick Boyle held that "vertical integration and strategic alliances used in many American industries" should not be made illegal for meat packers. "Such an action will turn the clock back on industry progress and the quality provided to consumers."

The hearing focused on USDA's enforcement of the Packers and Stockyards Act, and specifically explored a proposed ban on packers owning livestock more than 14 days before slaughter.

National Farmers Union supported including a ban on packer ownership in the 2002 farm bill; however, the ban did not remain in the final farm law. As an independent grain and livestock producer, Jungclaus spelled out the need for action and not additional studies on the concentration issue.

"A study will do nothing for family farmers while allowing the packers the opportunity to control the rest of the hog industry and an increasing share of the beef industry until there is nothing left for the American farmer except raising the owner's livestock for them on contract," he said. "I don't need a study to see the impact that consolidation has on Bob Hall who owns our local gas and grocery store and is forced to live on ever-tightening margins as packers and large retailers work together to eliminate competition," Jungclaus said.

He added, "And, I don't need a study to show me that the hardships our local businesses face directly impact our church offerings and the tax base that supports our schools and hospitals. It is time to take action and pass the ban on packer ownership of livestock."

Jackson, a fourth-generation farmer who runs stocker cattle in south central Oklahoma, told the committee that meatpackers, who already control up to 80% of the processing, have been able to undercut market competition by owning cattle and staying out of the cash market for extended periods of time.

He also said Congress must modernize the Packers and Stockyards Act to work in the current cattle market to provide real protections agriculture producers. "The Packers and Stockyards Act is over 80-years-old and we don't market in the same way as we did in the 1920's," he said. "Livestock producers, better than anyone, know how to produce top quality cattle, but they require open, transparent and competitive markets to benefit from their production," said Jackson.

Boyle vowed AM "will oppose any effort to restrict meat packers who comply with existing antitrust and fair business practice laws from sourcing their raw materials in any way. It is unfair to make it illegal for the meat industry to compete effectively with the vertically integrated poultry industry and many other vertically integrated industries for the consumer's dollar."

In addition to federal antitrust laws like the Sherman and Clayton Act, meat packers are also subject to the Packers and Stockyards Act, a statute unique to the meat industry. "To my knowledge, there is no other sector of the U.S. manufacturing or service economy in which government plays such a watchdog role with respect to raw material suppliers," Boyle said.

According to Boyle, consumers want consistent product quality at the best possible price. Consumer demand has led to fewer and larger retail chains in fields as diverse as home improvement, video rentals, food and consumer products and fast food.

Boyle told lawmakers that the meat industry has done many things - including increasing coordination with livestock producers and even owning some livestock -- to ensure that meat products meet consumer expectations. As a result of strategic alliances, packers today sell beef that is 27% leaner than it was in the 1980s and pork that is 31% leaner. Coordination and vertical integration also have created beef and pork products that are increasingly convenient and consistent, and many are value-added with features like marinades and sauces added to fresh, branded products.